Viceroy, a luxury and boutique hotel management company, shares tips on the metrics which matter with Pamela Whitby

Like many other hospitality firms Viceroy had, for a long time, focused on top line performance. That’s great, argues Scott Pusillo, the company’s VP of Sales & Revenue Management, but not so great if you get to that point via an inefficient mix of business or a costly acquisition source. In the end what a hotel management company, like Viceroy, is measured on is the ability to focus on costs and get the right and most profitable mix of business into its hotels.

In a world of big data, and with the right RM and business intelligence tools, this can be far more effectively managed so that revenue managers no longer need to act on gut instinct. In Viceroy’s case iDeaS is the revenue management solution of choice and to date it has installed HotelIQ, a business intelligence tool, in around a third of its hotels. Of course, those tools incur a cost, and it’s sometimes hard to get hotel owners to buy in, but the results speak for themselves.

Getting the average daily rate (ADR) right is the holy grail and today this involves, among other things, putting in place smarter pricing strategies, smarter availability restrictions and smarter inventory controls in yielding different categories of rooms, as opposed to always leaving the base category open. Importantly it is about drawing both historical and future data into the mix. Unlike in the past, big data that is properly processed and applied means revenue managers no longer need to act on gut instinct. “We don’t always get it right but you’ve got to be prepared to be wrong,” says Pusillo, adding that, “in making decisions and in taking risks you have a foundation on which to draw from in the future.”

In making decisions and in taking risks you have to have a foundation on which to draw from in the future

Scott Pusillo, Viceroy VP of Sales & Revenue Management

So what core metrics is Viceroy focusing on today?

• RevPAR (revenue per available room): Top line performance is, of course, important but, as Pusillo points out, it only takes into account net operating income (NOI) at a base level.
• GOPPAR (gross operating profit per available room). It is this that sets hotel groups apart from other companies, he argues, and is a stronger measure of efficiency in terms of how the business is containing costs and what the customer acquisition costs are.
• TRevPAR: (Total revenue per available room). For so long everybody has looked at room revenue and given very little credibility to additional revenue brought in by guests but that is becoming increasingly important. 

Important questions to ask when choosing which metric to apply include:

1.     Who is the most profitable guest?

While an individual guest may book at a higher room rate, wouldn’t it be better to have a corporate traveller who may stay for less but is more likely to entertain clients in the hotel, and possibly have his wife arrive for the weekend who uses the spa facility? Individuals who book for a shorter stay are often less likely to dine in the restaurant.

2.     Who/what will have the cheapest or most efficient cost of acquisition?

As an example, Pusillo says he would rather pay a little bit more to the travel agent through the GDS, because although that comes at a slightly higher cost, than say the 15% commission to the likes of booking.com, the travel agent takes care of the marketing piece. Says Pusillo: “With an OTA, I will continually have to replace that guest, spend more money on metasearch, SEO and PPC because I’ll need to drive people back to my website to book again. And that is difficult.”

On a final note, hotel groups need to look at total cost of acquisition across the entire spectrum and not just at what a single source of revenue cost.  

To find out more about how data and analytics is being used to improve business practices join us in New York (Jan 28-29) for Smart Travel Analytics, North America where Scott Pusillo, Viceroy’s VP of Sales & Revenue Management, will be speaking alongside other execs